ORDER
P.G. Chacko, Member (J)
1. After examining the records and hearing both sides, I note that a common issue arises in all these matters and that the same is covered by decisions of this Tribunal. Hence, after dispensing with predeposit, I take up the appeals for final disposal.
2. The appellants are manufacturers of cotton yarn. In terms of Rule 2(1)(d)(v) of the Service Tax Rules, 1994, they pay service tax on the Goods Transport Agency’s (GTA) Service received by them for inward transportation of their inputs and outward transportation of their final product. During the period of dispute [January 2005 to March 2006], for payment of this tax, they availed CENVAT credit of the duty/service tax paid on inputs/capital goods or input service, as the case may be. This was objected to by the department. Eventually, the Commissioner (Appeals), in the impugned orders, demanded service tax equivalent to the above credit. Hence the present appeals.
3. Learned Counsel has submitted that the GTA service received by the appellants for inward and outward transportation of goods should be deemed to be an ‘output service’ by virtue of Explanation to the definition of output service given under Rule 2(p) of the Cenvat Credit Rules, 2004. Accordingly, it is submitted, the appellants were entitled to pay tax on such services by making use of CENVAT credit availed on inputs, capital goods and input-services. It is further pointed out that a similar issue was considered by this Bench in the case of two other assessees and the same was held in their favour. Learned Counsel has produced copies of the relevant final orders [No. 606/2007 dated 18.5.2007 in Appeal No. S/12/2007 of M/s. RRD Tex (P) Ltd. and No. 746 to 772/2007 dated 22.6.2007 in a batch of appeals of M/s. MMS Steels Ltd. & Ors.]. I have heard learned DR also.
4. Paragraphs 3 to 5 of Final Order No. 606/2007 ibid are reproduced below:
3. After hearing both sides and considering their submissions, I find that the short question arising for consideration in this case required to be settled with reference to Explanation to the definition of “Output service” under Rule 2(p) of the CENVAT Credit Rules, 2004. The definition, with the Explanation, is reproduced below:
Output service” means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy-holder or any other person, as the case may be, and the expressions “provider” and “provided” shall be construed accordingly.
Explanation: For the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall be deemed to be the output service.
It has been pointed out by learned Counsel that the Explanation was omitted on 19.04.2006 and the same was in force during the period of dispute. In the present case, the appellants were only receiving taxable services and not providing any, but they were discharging Service Tax liability in respect of the “Goods Transport Agency’s Service” received for the inward and outward movement of the goods. As per the above Explanation, where a person liable for paying Service Tax does not provide any taxable service, the service for which he is liable to pay Service Tax shall be deemed to be ‘output service’. Accordingly, the “Goods Transport Agency’s Service” on which the appellants paid Service Tax shall be deemed to be their “output service”. It would follow that, for payment of Service Tax on this “output service”, credit of Service Tax paid on any input service and/or credit of duty paid on any input or capital goods could be validly availed. The decision to the contra taken by the lower authorities cannot be sustained.
4. In the case of The India Cement Ltd. v. Commissioner of Central Excise, Salem, cited by learned Counsel, a similar question had arisen and this Bench held as under:
By virtue of the Explanation, it shall be deemed to be “output service”. In other words, the appellants, while paying Service Tax on GTA Service availed in connection with removal their final product from factory, were doing so on an “output service” and, therefore, they were entitled to utilise, for payment of Service Tax on such service, credit of the tax paid on the input GTA service availed by them in connection with receipt of inputs into their factory.
The Explanation referred to in the above order of this Bench (Final Order No. 262/07 dated 20.03.2007) is the same as what has already been discussed earlier in this order. Even without reference to the Explanation, as learned Single Member of the Tribunal at Delhi allowed similar credit to the assessee in the case of Commissioner of Central Excise, Chandigarh v. Nahar Industrial Enterprises Ltd. in Appeal No. 22 of 2007-NB(SM) dated 07.03.2007 2007-TIOL-555-CESTAT-DEL cited by learned Counsel. Learned SDR has particularly relied on a circular dated 03.10.2005 of the Board. A part of this circular is seen to have been reproduced in the impugned order. This is a clarification to the effect that, under the provisions of Section 68(2) of the Finance Act, 1994, a person discharging Service Tax liability is neither the provider of output service nor the manufacturer of final product as required under the CENVAT Credit Rules, 2004. This clarification did not take into account the above Explanation and cannot hold good during the currency of the Explanation.
5. In the result, the impugned order disallowing the credit is set aside and this appeal is allowed.
5. Following the above decision, the impugned orders are set aside and these appeals are allowed.
(Dictated and pronounced in open court)